Rail maintenance slows Rio, big dividend still likely

Mining giant Rio Tinto has reduced production guidance to the lower-end of its earlier forecasts, but shareholders are still expecting a large dividend as a result of the Coal & Allied sale and solid cash flow.

In its second quarter operations review, Rio – which operates on the calendar year cycle as opposed to the Australian financial year cycle – said its iron ore shipments were impacted by accelerated rail track maintenance.

It lowered Pilbara iron ore guidance to around 330 million tonnes for the year, down from its prior guidance of between 330 and 340 million tonnes.

Queensland coking coal guidance has also been impacted by Cyclone Debbie, with guidance now at 7.2 to 7.8 million tonnes, down from previous guidance of 7.8 to 8.4 million tonnes.

Despite these letdowns, Rio boss J-S Jacques said the quarter was still a solid one, with a record 12.9 million tonnes of bauxite production among the highlights.

“This was a solid quarter for production, including record output at our bauxite operations,” he said. “Iron ore production was in line with last year, although iron ore shipments were impacted by an acceleration in our rail maintenance program following poor weather in the first quarter.”

Solid cash flow and the recent announcement of the sale of Rio’s Hunter Valley Coal & Allied coal mine business to Yancoal will likely mean a good dividend coming up for shareholders.